"Every person who acts as a pawnbroker must hold a licence" (Secondhand Dealers and Pawnbrokers Act 2004). If you carry on business as a pawnbroker without a licence you could be prosecuted and fined up to $20,000.

A pawnbroker is, broadly, a person (including a company or partnership) who, in expectation of profit, gain, or reward, lends money on the security of goods by taking those goods into their (the pawnbroker’s) possession but without taking ownership of the goods.

The legal requirements surrounding pledges and pawnbroking contracts are complex. The information below is an overview relevant to pawnbroking activities under the Act. This should not be used as a substitute for legal advice specific to your own situation.

Possession of pawned goods

When you take possession of any pawned goods you must give the pledger a pledge ticket for the goods.

You must retain pawned goods until the redemption date has passed.

Labelling of pawned goods

You must attach a label to any pawned goods that you take possession of. This label must bear the number that you assigned to it in your pawnbrokers record. This label must remain attached to the goods until the goods have been redeemed or otherwise disposed of.

Rights of pledgers

A pledger has the right to redeem his or her pawned goods from you on payment of the redemption price. The pledger has the right, at any reasonable time, to inspect the pawned goods. The right of inspection allows the pledger to:

Pawnbroker’s rights when pawned goods not redeemed

If a pledger has not redeemed his or her pawned goods on or before the redemption date, as a licensed pawnbroker you may sell the goods to recover the redemption price.

You must offer the unredeemed goods for sale by way of:

public auction

publicly accessible Internet auction website.

Public auction means an auction that complies with the Auctioneers Act 1928, the Auctioneers Regulations 1958 and regulation prescribed in the Secondhand Dealers and Pawnbrokers Regulations 2005.

A public auction used to sell unredeemed pawned goods must not be conducted by:

the pawnbroker involved in the pledge contract

the pawnbroker's spouse, de facto partner, parent, child, or sibling

the pawnbroker's employee

in the case of a pawnbroker that is a company, a person concerned in the management of the company.

If, at auction, the goods attract a bid that is equal to or exceeds the redemption price, the goods must be sold. If the goods do not sell at auction, the pawnbroker may sell the goods in any other way that is likely to yield a realistic price.

When unredeemed goods attract a price higher than redemption price

When any pawnbroker sells unredeemed goods that attract a sale price in excess of the redemption price, there is a strict process that must be followed for dealing with the excess received.

The excess must be divided:

10 percent for pawnbroker

90 percent for the pledger.

As a licensed pawnbroker you are entitled to keep your 10 percent share. You must hold the pledger's 90 percent for six months from the date of the sale. If the pledger does not claim his or her 90 percent within that time you may keep that portion of the excess as well.

If the amount of the excess is greater than $10 you must write to the pledger as soon as practicable and advise him or her of:

the amount of excess to which he or she is entitled

the date by which his or her portion of the excess must be claimed (six months from the date of sale).